{"id":2347,"date":"2024-03-25T00:01:27","date_gmt":"2024-03-25T00:01:27","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/03\/25\/you-need-to-understand-now-what-changed-after-the-fed-announcement\/"},"modified":"2024-03-25T00:01:27","modified_gmt":"2024-03-25T00:01:27","slug":"you-need-to-understand-now-what-changed-after-the-fed-announcement","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/03\/25\/you-need-to-understand-now-what-changed-after-the-fed-announcement\/","title":{"rendered":"You Need To Understand NOW What Changed After The Fed Announcement"},"content":{"rendered":"
\n

I\u2019ve always liked to look at certain points during a bull market or bear market where the character of the market could change based on key fundamental news. We were at one of those points on Wednesday as 2 o\u2019clock approached. The Fed was about to deliver their latest policy statement and traders were on pins and needles. Questions were swirling about what the Fed might say, and do, given the February Core CPI and Core PPI numbers that were reported higher than expected. The Fed already has squashed the bulls once recently, when they shot down the possibility of a March 2024 rate cut after expectations were building for exactly that. There were still the 3 rate cuts supposed to occur in 2024, but the Fed told us that higher rates would remain a bit longer.<\/p>\n

Most traders are not blessed with great patience. Things could have turned ugly this past Wednesday at 2pm ET if the Fed decided to wait even longer to lower rates, possibly cutting the expected number of rate cuts from 3 down to some lower number. And what might happen if the Fed did an \u201cabout face\u201d and said something that might indicate they\u2019d have to reconsider hiking again? After all, this Fed hasn\u2019t exactly been consistent in its discussion about interest rates.<\/p>\n

Well, a lot of that anxiety came to an end on Wednesday as the Fed stuck to its previous guidance, despite the higher inflation reports the week prior. The stock market NEVER performs well when uncertainty is rising, but it generally does quite well when that anxiety is diminished. So at the moment the Fed indicated that nothing had really changed in their view, the stock market screamed higher, with the small cap IWM quickly testing overhead price resistance:<\/p>\n

This was the chart I sent to EB members in my Daily Market Report on Thursday. Small caps received the news it was looking for and reacted according \u2013 to the upside. But the closing breakout never occurred on Thursday and that false breakout led to some profit taking on Friday. It\u2019ll be interesting to see where small caps head this week. Since 1987, the annualized return for the IWM over the next 7 days is 41.20%, more than 4 times its average annual return. This tells us that history suggests a strong week ahead for small caps. But nothing is more important than the combination of price and volume. Before we grow overly excited about IWM\u2019s prospects, we need to clear candle body price resistance, currently at 208.21.<\/p>\n

Major Index and Sector Rotation<\/h2>\n

With this new information (basically the same as the old), and with inflation fears subsiding further, where did the money go from Wednesday 2pm ET through Friday\u2019s close? Shouldn\u2019t we be interested in what the big Wall Street firms were doing with their money after this fundamental announcement? Well, this is what the big boys were favoring after the announcement.<\/p>\n

Major Indices<\/strong><\/p>\n

NASDAQ 100 (QQQ): +1.74%
\nRussell 2000 (IWM): +1.73%
\nS&P 400 Mid Cap (MDY): +1.55%
\nS&P 500 Large Cap (SPY): +1.11%
\nDow Jones (DIA): +0.92%<\/p>\n

Sectors<\/strong><\/p>\n

Industrials (XLI): +1.49%
\nCommunication Services (XLC): +1.46%
\nTechnology (XLK): +1.34%
\nConsumer Discretionary (XLY): +0.84%
\nEnergy (XLE): +0.74%
\nFinancials (XLF): +0.73%
\nHealth Care (XLV): +0.48%
\nMaterials (XLB): +0.42%
\nReal Estate (XLRE): +0.16%
\nUtilities (XLU): +0.05%
\nConsumer Staples: -0.08%<\/p>\n

Clearly, money rotated and benefited \u201crisk on\u201d areas of the stock market, which is secular bull market behavior. Aggressive sectors led by a wide margin over defensive sectors. Money also returned to growth as most growth vs. value ratios turned higher after Wednesday 2pm ET as well.<\/p>\n

Industry Group Rotation<\/h2>\n

We now know that money rotated in bullish fashion and to more growth-oriented areas, though industrials\u2019 leadership and the S&P 500\u2019s break to yet another all-time high after the Fed announcement is further evidence of wide participation in this latest advance. And with small caps right up there with the NASDAQ 100, all those breadth arguments can be tossed right out of the window.<\/p>\n

Here\u2019s what we should take away from industry group performance after the Fed meeting:<\/p>\n

Semiconductors ($DJUSSC) was #1 among ALL industry groups \u2013 not too shocking
\nThe Top 10 industry group performers belonged to either technology (XLK), consumer discretionary (XLY), or industrials (XLI)
\nHeavy construction ($DJUSHV) had broken out a few weeks ago and the Fed announcement saw momentum increase significantly within this group
\nTrucking ($DJUSTK) bounced off 50-day SMA support and is poised to break further into all-time high territory, a very bullish development for transportation stocks ($TRAN) in general
\nGold mining ($DJUSPM) and mining ($DJUSMG) both saw bullish initial reactions, but then gave back most of those gains by Friday<\/p>\n

Big Loser<\/h2>\n

In my mind, it\u2019s once again gold ($GOLD). I think many traders believed that falling rates ahead would trigger a drop in the U.S. Dollar (UUP). Not gonna happen. Any weakness in the dollar of late has been triggered by potential erosion by inflation. The Fed essentially said that inflation isn\u2019t a problem, despite the higher CPI and PPI readings recently. Our economy remains quite resilient and unemployment remains low, especially compared to foreign economies. That\u2019s why the UUP is strong. Another breakout in the UUP could be at hand:<\/p>\n<\/p>\n

I know many keep pointing to the recent breakout in GLD, but I want to OUTPERFORM the S&P 500 and the above chart shows you that, outside of a few short-term pops to the upside (blue-dotted directional lines), the overall RELATIVE performance line is going down, down, down in a very big way. No thank you.<\/p>\n

A Rapidly-Improving Heavy Construction Small Cap Stock<\/h2>\n

I was focusing on the heavy construction area ($DJUSHV) this weekend, because of its recent strength and then the surge after last Wednesday\u2019s Fed meeting and policy statement. There are a number of stocks that caught my attention, but one in particular that I believe has a LOT more upside given its current technical outlook. I\u2019ll be sending it out to our FREE EB Digest subscriber community before the market opens tomorrow morning. If you\u2019re not already a subscriber, you can CLICK HERE<\/a> to sign up with your name and email address. There is no credit card required and you may unsubscribe at any time!<\/p>\n

Happy trading!<\/p>\n

Tom<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

I\u2019ve always liked to look at certain points during a bull market or bear market where the character of the market could change based on key fundamental news. We were at one of those points on Wednesday as 2 o\u2019clock approached. The Fed was about to deliver their latest policy statement and traders were on […]<\/p>\n","protected":false},"author":0,"featured_media":2348,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-2347","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/2347","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=2347"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/2347\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/2348"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=2347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=2347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=2347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}